Robert S. Katz is a Research Analyst with the Washington, D.C.-based World Resources Institute and editor of NextBillion.net -- Development Through Enterprise. His current research documents unmet human needs in low-income communities and identifies the corresponding market power of the poor.

Driving to a show at Wolftrap this past Friday, a story on NPRs Marketplace prompted me to turn up the volume  the national business media was covering WIZZIT, a South African cell phone banking firm.

The concept of mobile phones is not new to Worldchangers, of course. For the uninitiated, WIZZIT is a 1-year-old start-up changing the face of South African banking. Their low-cost cell phone debit service, which comes with a funky Maestro debit card, has quickly developed what the Mail and Guardian calls a cult status in poor townships. Marketplaces Gretchen Wilson describes how it works:

[A customer] can make deposits at a bank or at any post office. They scan his debit card, take the cash, and then immediately credit his account. He gets a text message to prove it. Then he uses commands on his cell phone to check his balance, transfer money - even pay his electricity bill. He uses his debit card to buy things or to withdraw cash.

According to WIZZIT chairman Brian Richardson, there are 16 million unbanked people in South Africa  a challenge to development, sure, but also a potentially huge untapped market. WIZZIT isnt the only firm to recognize the latent potential of the BOP financial services market: banking majors Standard and FSB, as well as cell phone giant MTN, actively vie for BOP customers.

What seems to set WIZZIT apart from its competition is a combination of low fees (there are no minimum balances and per-transfer charges are cheap) and excellent customer service.

The business model makes sense  Marketplace reports that 35 percent of the 16 million unbanked (5.6 million people) own their own cell phone. Critics might argue that poor people are ill-suited to use debit cards, and having credit might bury some in debt. Economists tell a different story: better access to phones spurs economic growth, while access to financial services unlocks dead capital.

There are, of course, issues. Adding customers is difficult in a highly-competitive environment, and there's no guarantee that each customer will complete enough transactions for WIZZIT to break-even. Furthermore, CGAP documents a myriad of barriers preventing BOP customers from getting cash into the electronic system.

Despite these challenges, hearing WIZZIT on the radio was music to my ears  it proves that entrepreneurs can succeed by targeting the BOP market. Marketplace has the full text as well as the audio online  check it out.

So when are all these entrepreneurs going to invest their billions into strengthening the State - the only instrument to bring justice and prosperity.
Just turning the poor into commodity guzzling ants of the neoliberal free market is a recipe for disaster. That has been proven beyond a doubt now.

The most effective, the most ethical, and the most rational form of investment imaginable nowadays is to invest in The State. All the rest is mere complicity with capital's neoliberal terrorism.

Posted by: Lorenzo on 22 Jun 06

Lorenzo,

You raise an important point, but I think the issue is a bit nuanced that you make it out to be.

There are several cases where The State squanders or misuses funds, and enslaves, kills or otherwise mistreats its citizens, especially in Africa.

I agree that there are cases where encouraging, if not instilling, mad consumerism is bad, but there are also cases where businesses both add value to society and generate a profit. In the best cases, including many of those featured on this site, companies do both, and occaisionally reinvest some of their profits in the greater good.

It's a case-by-case thing, and generalizations don't apply. Do you have specific issues with this company, or are you just blindly anti-marketplace?

Posted by: Greg Berry on 22 Jun 06

I think that insted of investing in the state, people should support private enterprises to promote development. Government acts in a (nearly) altruistic manner, giving all without asking back (the organization's mandate, not the people behind it of course). Wizzit is such an exemplary private initiative, it involves people, promotes savings (savings = investment!) and fuels progress.

I don't know where your state is, Lorenzo, but I don't find that money that goes to the US gov't comes back in any particularly productive way. Independent NGOs, both the charitable kind that dominate here as well as co-ops, unions, etc., are almost always more in line with my idea of a green perspective, and they're considerably easier to influence or to walk away from if they're going down the wrong path.

I'm no pro-capitalist, but I don't think I'm going to put much trust in my national State anytime soon either. Despite their basic profit motive, there are many many companies I trust more than the US govt., particularly while BushCo are running it.

Posted by: Dave Cutler on 23 Jun 06

Dave, I was talking about the 'state' in Africa or in other places troubled by total state collapse.
Neoliberal capitalist - forcefed by the IMF, the Worldbank and many of the NGOs who in fact are their objective allies - have destroyed countless states.

They forced these states to give up investments in the most crucial public goods: health care, education, safety. All this so that capitalism and entrepreneurs can come in and grab the spoils.

This borders on the criminal. And that's why I said that priority should go to investing in States and their services, and not in private enterprise.

I have no problem when an entrepreneur wants to sell an interesting technology in the South. But he should only do so when the country he's investing in, maintains basic State services. If not, he's complicit with the neoliberal agenda.

So I was not really addressing functional States in the North (whose aim in the South is to destroy functional states).

Posted by: Lorenzo on 23 Jun 06

Lorenzo,

It's a lot easier to sustainably grow the State if the businesses it taxes are growing. This is what social democrat / neoliberals like Blair have discovered, people don't mind the government raising taxes so long as it doesn't break the money machine.

As for entrepeneurs, investing in state health care gives returns for the state and its people, not the entrepeneurs; if they spent their money that way they'd be philanthropists. And Slavoj Zizek told me they were evil.

It's a lot easier to sustainably grow the State if the businesses it taxes are growing.

Fair point, but let's not forget that capitalists want to lower taxes and keep the state to a minimum.
In the capitalist states of the West, this is problematic, since these states (in Europe and America) have smart populations. And smart populations don't want to be forcefed neoliberal predatory policies. So the capitalist always has to be careful or he will be ousted there.

But what the capitalist has always done, is to look at other countries, where he gets a free ride (colonies, or neoliberal satrape states today). There he destroys states, lowers taxes, plunders the country. That's exactly what he has always done. And that's why entrepreneurs in the developing world must be watched. They often collaborate with the local state elites, who in turn are supported by states from the West.

So it would be simplistic to say that in all countries more taxes means more State income. This is an interdependent world, where the capitalist uses colonies to make his money. During the era of colonialism he made sure he himself was the State. In the era of neocolonialism, he installs a weak pseudo-state, so that he can loot from a distance.

About the philantropists: Zizek is right, "liberal salon communist geeks" (many of the people presented here at World Changing resemble what he describes) don't ask any fundamental questions. They're embellishment, they embody the status quo. I was not calling on them to invest in the State. I was calling on them to stop being "entrepreneurs" (i.e. collaborators with the right wing) and instead devote their lives to doing something real - like bringing social justice and exposing themselves and their liberal agenda.

From the text you're referring to:
Zizek: "According to liberal communist ethics, the ruthless pursuit of profit is counteracted by charity: charity is part of the game, a humanitarian mask hiding the underlying economic exploitation. Developed countries are constantly helping undeveloped ones (with aid, credits etc), and so avoiding the key issue: their complicity in and responsibility for the miserable situation of the Third World. As for the opposition between smart and non-smart, outsourcing is the key notion. You export the (necessary) dark side of production  disciplined, hierarchical labour, ecological pollution  to non-smart Third World locations (or invisible ones in the First World). The ultimate liberal communist dream is to export the entire working class to invisible Third World sweat shops."

Worldchanging should read his texts - they offer a serious criticism of everything Worldchanging stands for, with its talk about "The Next Billion", "smart mobs", entrepreneurialism in the third world, etc...

Lorenzo,
While many of your points are valid, as a South African I know what the situation 'on the ground' is and believe me when I say that this sort of entrepeneurial endevour can only be good for us.

The problem isn't small startups coming in and 'looting' our economy but rather a few entrenched interests and oligopolies that fight to keep their own cushy markets to themselves.

I, for one, am very optimistic about any group that has a strategy aimed at the poor people in my country who have been traditionally marginalised by the 'big 5' banks with (virtually) criminal bank charges and barriers of entry into having banking accounts.

Needless to say it is the people without bank accounts that are most regularly 'liberated' of their savings in the townships.